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DG Competition June 2004

Revision of the regional aid guidelines (RAG). DG Competition June 2004. Main policy objectives. Concentration of regional aid to investment in the least favoured regions Increased flexibility for Member States and regions to pursue local regional policy

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DG Competition June 2004

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  1. Revision of the regional aid guidelines (RAG) DG Competition June 2004

  2. Main policy objectives • Concentration of regional aid to investment in the least favoured regions • Increased flexibility for Member States and regions to pursue local regional policy • Enhancing the long-term competitiveness and growth potential of all European regions

  3. Current rules • Basic principle: exceptional nature of regional aid • Overall coverage of 42.7% of Community population • Criteria for allocating the Community ceiling between Member States • Criteria for selection of Article 87(3)(a) and Article 87(3)(c) regions

  4. The context of the revision • The current maps expire on 31.12.2006 • DG COMP has made use of • Conclusions of European Councils • Comments submitted by Member States • Experience with the present RAG, aid maps and aid schemes • Literature (surveys, studies and academic papers) on the economics and effectiveness of regional aid • The Third Cohesion report

  5. Conclusions of European Councils • The Lisbon, Gothenburg, Stockholm and Barcelona European Councils: less and better-targeted State aid • Questions • Is the award of aid for initial investment and linked job creation really the most effective way of promoting cohesion? • Can the aid levels allowed under the present guidelines be reduced without decreasing the effectiveness of such aid?

  6. The Third Cohesion report • Three main objectives: convergence, regional competitiveness and employment, and European territorial co-operation • Convergence will be promoted by supporting growth and job creation in the least developed Member States and regions • Regional competitiveness and employment will be promoted by supporting a limited number of domains of intervention: innovation and the knowledge economy, environment and risk prevention, accessibility and services of general economic interest • The choice of a thematic approach rather than one based on selected geographic areas (map-based approach) allows for coherence between regional and competition policies

  7. A new approach to regional policy • Shifting from subsidies that temporarily compensate for regional disadvantages to the provision of public goods and incentives permanently increasing the potential of regions to growth • Regional investment aid to the poorest regions • Operating aid in limited cases (outermost regions and low population density areas) • Phasing out of regions that lose eligibility to Article 87(3)(a) • Horizontal thematic approach for the rest of the territory

  8. Areas eligible for Article 87(3)(a) • NUTS II regions with GDP/cap below 75% of the EU-25 average • GDP below 50%: 50% gross for large companies • GDP below 60%: 40% gross for large companies • GDP below 75%: 30% gross for large companies • Operating aid in limited cases • handicaps of outermost regions • additional transport cost in low population density areas

  9. Earmarked Article 87(3)(c) regions • Regions losing Article 87(3)(a) status because of the statistical effect of enlargement • Regions losing Article 87(3)(a) status due to economic reasons • Other outermost regions • Other low population density areas

  10. Population coverage • Total (provisional) coverage: 34.84% of Community population • Abnormally low standard of living: 27.11% • Statistical effect regions: 4.18% • Economic growth regions: 2.71% • Other outermost regions: 0.43% • Other low population density areas: 0.41%

  11. Any other regions • Thematic approach in State aid • Horizontal rules, many of which will be reviewed before 1.1.2007 • New approach for the assessment of lesser amounts of State aid and of certain aids with limited effects on trade (significant impact test) • Increased flexibility for Member States to tackle local problems and to differentiate between regions where this is considered to be necessary

  12. Existing horizontal instruments • SMEs: aid for investment, advisory services and participation in trade fairs • R&D: aid for basic and applied research projects • Environment: aid for environmental investment (incl. energy saving, renewables, polluted sites, relocation), and operating aid for recycling and renewables • Training: aid for general and specific training of employees • Employment: aid for net job creation and for employment of disadvantaged and handicapped people • Rescue and restructuring: rescue aid (liquidity injection for 6 months) and restructuring aid • Risk capital: aid for risk capital funds • de minimis: small amounts of aid for anything

  13. The significant impact test • Aid with limited spillovers (small distortions of competition and limited effect on trade) to be considered compatible with the common market • Based on economic rationale • Involving clear and easy criteria that require minimal or no assessment • Leading to a reduction in workload • Being transparent

  14. Services of general economic interest • Financial support which merely represents compensation for public service obligations imposed by the member states does not have the characteristics of State aid (Altmark ruling) • Definition of public service obligations • Compensation calculated in an objective and transparent manner • Compensation cannot exceed what is necessary to cover all or part of the costs incurred • Undertaking is chosen via public procurement, or the level of compensation is determined by comparison with the costs which a typical undertaking would incur

  15. Other issues for the revision of the regional aid guidelines • Multisectoral Framework will become part of the regional aid guidelines • Possible block exemption for regional aid • Further differentiation between small and medium-sized enterprises • Consistency with Structural Funds • Net or gross grant equivalents

  16. Proposed aid intensities

  17. Specific provisions for outermost regions • All outermost regions are entitled to a bonus of 10% in aid intensities, which will place them in a “higher” category • Outermost regions eligible to Article 87(3)(c) are treated as “statistical effect” regions, with maximum aid intensities gradually decreasing from 40% to 30% in the course of the period covered by the aid map

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